Will Inflation Influence The Home Improvement Projects Completed This Year?
Megan Satawa6-minute read
UPDATED: May 16, 2023
Amid a competitive housing market, rising home prices and higher interest rates, homeowners are considering options to update or renovate their homes instead of selling and buying a new home. However, inflation and workforce reduction have caused many Americans to become more cautious about how they spend their money. Is that stopping them from making these home improvements? The answer is no.
Almost Two-Thirds Of Homeowners Completed A Home Improvement Project Last Year
Despite such factors, a recent 1,000-person study by Rocket LoansSM found that 61.9% of homeowners reported completing at least one home improvement project in the last 12 months. Even more homeowners want to improve their house in the next 2 years, with 76.7% planning to complete one or more home improvement projects.
What home improvement projects are Americans choosing to invest in? Let’s first look at the trends for projects completed in the last year.
Landscaping Is The Most Popular Home Improvement
Home improvement projects became increasingly popular during the pandemic. These projects can increase the value of a home, but it’s important to complete projects that have a high return on investment. With costs of material increasing, choosing projects that are going to be worthwhile for a home’s value is vital.
Most Americans seem to agree. Of those who have completed improvements in the last year, at least one of the following value-boosting projects were done:
- Improving landscaping (26.3%)
- Updating bathrooms (15.1%)
- Replacing flooring (13.2%)
- Replacing the roof (12.6%)
- Updating the kitchen (11.2%)
Home Improvement Costs in 2022 – 2023
According to Home Advisor, Landscaping cost anywhere from $4 – $6 per square foot, up to $40 per square foot, depending on the complexity of the project. On the high end, it could cost up to $100,000.
For higher-cost landscaping projects, DIY is an alternative to allow homeowners to only invest in construction materials. Landscaping projects are one of the most popular home improvements to make for Americans. This could be because there’s no need for renovation or demolition. It could also be that a well-maintained landscape can increase a home’s value 5% – 12%.
Updating certain rooms can also be a game changer inside the home. A bathroom remodel cost $11,373 on average in 2022. Kitchen upgrades are the least popular home improvement spending project among homeowners and also the most expensive. The national average for a major kitchen remodel in 2022 was $20,000 - $70,000. But remodeling can lead to benefiting from the newest technology and creating a cooking space designed exactly to the homeowner’s vision.
Additionally, replacing the floor cost upward of $22 per square foot. However, updating flooring from carpet to hardwood can improve the air quality and provide less exposure to allergens and molds. An additional option to a floor replacement is a floor covering.
The national average cost to replace a roof in 2023 is $9,089. The return on investment is typically 60% or more. In some instances, it can be almost 100%.
Over Half of Homeowners Are Paying For Home Improvement Projects With A Credit Card
Just over half of all American homeowners who completed a project in the last 12 months, paid for some or all the work using a credit card.
While some credit cards are great options for a home remodeling project if they have the right benefits, home equity loans actually have the lowest interest rates compared to using a credit card with a high APR. On average, homeowners report having $110,001 – $150,000 in home equity. However, a substantial portion of homeowners (20.7%) have no idea how much home equity they have which could mean they are missing out on opportunities to tap into that equity.
That could be one reason more homeowners aren’t taking advantage of home equity loans with lower fixed-interest rates. For many, it seems to be a matter of financial literacy and education around home equity loans. When survey participants were asked to identify the correct definition of a home equity loan, 79% of them could not correctly identify the definition. Of those same American homeowners, the majority of the have never gotten a home equity loan (71.7%) which most likely was a factor in their difficulty in understanding the benefits of a home equity loan.
With better understanding of their equity and financing options, perhaps those who plan on completing a home improvement project in the future could turn to these resources.
Homeowners Plan To Complete Home Improvement Projects In The Next 6 – 10 Months
Despite worries of high inflation rates and economic challenges, on average people still plan to complete most future home improvement projects no sooner than 6 months but no later than in 10 months. According to the survey results, home remodels and floor replacements are two projects that will be popular in the next 6 months, while roof replacements or basement upgrades are more likely to be done in the next 10 months.
Sometime in the next 2 years, more than two-thirds of American homeowners plan to complete one or more of the following projects:
- Landscaping (24.3%)
- Updating bathroom (21.5%)
- Replacing the floor (hardwood, carpet, etc.) (19.1%)
- Outdoor living improvement (patio, deck, pool, hot tub, fireplace, outdoor kitchen, etc.) (17.8%)
What Is Driving Completion Of Home Improvement Projects In The Next Year?
When survey respondents were asked why they’re taking on home improvement projects, most claimed it was because they wanted to – not because they needed to. On average, 70.9% of homeowners want to complete home improvement projects to either increase home value or because they’ve always wanted an upgrade.
The top three projects homeowners are completing simply because they want to upgrade are:
- Finishing the basement (59.3%)
- Improving outdoor living features (55.1%)
- Updating the kitchen (50.9%)
The top three projects homeowners are completing because they want to increase home value are:
- Inspecting or fixing radon/asbestos issues (61.5%)
- Waterproofing the crawl space (59%)
- Building an addition to the home (46.9%)
The top three projects homeowners are completing out of necessity are:
- Replacing the roof (56.1%)
- Replacing the A/C furnace or water heater (47.4%)
- Replacing windows and side doors (38.7%)
The Majority of Homeowners Are Excited To Complete Future Home Improvement Projects
On average, 68.8% of homeowners who plan on completing a project in the next 2 years feel positive about it, despite material costs. The top projects homeowners are most looking forward to involve improving outdoor living spaces. Of the homeowners completing an outdoor renovation, 86% are excited for the results.
Of the homeowners building an addition, 86.4% are positive about the project, which can create more space and create opportunities to customize home spaces to the needs of those living there.
A finished basement gets a similar reaction, with 79.7% of those planning for one excited for the result. Adding insulation is another way to improve quality of life and 79.6% of homeowners taking on that endeavor feel positive about it. Similarly, an overall home remodel receives a positive sentiment from 81.6% of those planning this costly and substantial renovation.
Some home projects are completed based on necessity, which may lead homeowners to not feel as pleasant about these projects. Compared to homeowners planning projects they wanted to do, more homeowners felt negative feelings toward projects they had to do. While the majority still felt neutral or positive about these renovations, some shared a negative sentiment. Of those in the group that had to do each of the following improvements:
- 8% felt negative about having to do an asbestos/radon inspection or remediation.
- 8% felt negatively about having to replace their roof (which is one of the costliest renovations).
- 23.1% shared a negative sentiment about replacing the air conditioning, furnace or water heater.
Bottom Line: Inflation Won’t Stop Home Improvement Projects
Despite rising costs, the majority of homeowners still plan on investing money into bettering their homes. Most people are planning improvements out of a desire to increase their home value or upgrade their living situation – not because of necessity. Whether the projects are wanted or needed, those looking to complete the projects in the next 2 years have a positive outlook. While many will likely pay out of pocket or finance all or a portion of the project, they may be missing out on the opportunity to use their home equity. This appears to be due, in part, to a lack of knowledge and understanding of the loan product and/or how much equity they have in their home.
To understand more about homeowners’ home improvement project plans, Rocket Loans surveyed one thousand American homeowners 25 years old or older with a mortgage. Homeowners were asked about their knowledge on home equity loans as well as how much home equity they have tied up in their property. They were also asked about home improvement projects they have completed already in the past year, what plans they have for the next 2 years and how they feel about these different projects. This survey was conducted March 13, 2023. The 2022 – 2023 home improvement costs listed in this article are sourced from HomeAdvisor and were reviewed on April 26, 2023.
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